Social security is based on intergenerational transfers (from active workers to pensioners) and in this way, it replaces the support given from children to parents (upward transfers) within the family. What were the main features of the family structure, dependency rates, fertility, life expectancy for men and women and other characteristics when Germany implemented its social security programs led by Bismarck?
Maria,
you adress a serious (and rather controversial) issue in Germany's social policy. The question is, whether the implementation of a social security system was a reaction on Germany's demographic change, caused by industrialisation, or whether fertility rates dropped due to the installation of a public pension system (so called "social security hypothesis). I would argue in favor of the first argument, but this is debatable. Anyway, in the second half of the 19th century, fertility rates dropped sharply in Germany (from about 5 children per woman to slightly above 2; we call this the "first demographic transition"). Average life expectancy was 35 years (men) and 38 years (women). You can find lots of data and empirical research on demography in Germany here
http://www.bib-demografie.de/EN/Home/home_node.html
and here:
http://www.demogr.mpg.de/en/default.htm
Hope this helps. If you have any further questions, please do not hesitate to contact me,
yours
Jörg
Dear Jörg,
Thanks much for your answer. I will consult both the links that you have shared with me to better document the two hypothesis. As you know, Latin American countries adopted social security systems in the 20th century (there are "early" and "late" adopters) and at least 12 separated and privatized pension schemes in the 90s (pioneer was Chile in 1981). One of the main arguments was demographic transition (jointly with the huge public pension debt and etc). I think, however, that in the 90s fertility rates were higher than in Germany at the time of soc sec adoption, thus I don´t think that it counts as a justification. I did not know that life expectancy was this low in Germany.
Again, thanks much for your help!
Best wishes ---- maria
Maria,
I would recommend you to read the papers of Mikołaj Szołtysek and Siegfried Gruber especially.:
http://www.demogr.mpg.de/en/projects_publications/publications_1904/journal_articles/spatial_variation_in_household_structures_in_19th_century_germany_5150.htm
http://www.censusmosaic.org/sites/default/files/downloads/publications/2009/wp-2009-039.pdf
http://www.cairn.info/resume.php?ID_ARTICLE=ADH_122_0233
The papers bring the very indepth analysis of HH structure in the 19th c. Germany, so the period of change from "traditional" to "modern" demographic system.
Best Regards,
BO
Maria,
After decades of arguing over "which came first", some demographers (at least) are settling into the assumption that this relationship (like most socioeconomic relationships that are associated with the demographic transition and the accompanying age-structural transition) is a "chicken-and-egg" story (a big feedback loop, or several of them between various levels of analysis).
Here's my narrative: (1) To produce a pay-as-you-go (PYG) retirement system, the state requires a sizable formal sector and payroll taxes, and/or substantial taxes on natural resource production (oil/minerals) -- thus the "industrialization came first" argument.
However, (2) fertility decline (which will ultimately drive down the support ratio and weaken "extended family" relationships) pushes the low-fertility middle class towards supporting this PYG tax burden (thus, didn't the initiation of fertility decline come first?).
A third element: (3) Having a high worker:retiree ratio (support ratio) makes it easy to start the PYG system (to "grandfather in" the retiring generation). So, it's advantageous to start once (1) and (2) are in place, but before the age-structure matures (median age 35+).
Chile was at this "demographic spot" -- its TFR decline was well underway (TFR about 2.7 in 1980, and thus the contraceptive prevalence rate was probably above 50% by then), but it still experienced a youthful age-structure (a median age of about 22.6 in 1980, somewhat like Syria today). [UN Pop. Div. estimates, the 2012 Revision]
The next chapter: (4) Once population momentum has been depleted by sustained near-replacement TFR (or below), there is fiscal pressure to move from PYG systems to a broader set of defined contribution instruments, such as a partially flexible tax-sheltered option (in the US, the tax-deductable IRA system), and perhaps a "forced savings/investment" that the owner can move between qualified options. These are the "3 pillars" that feature in some of the recommendations concerning age-structure and retirement.
Of course, all of this is debatable ... this is just my (demographically focused) understanding the evolution of state social security systems.
Richard Cincotta
The Stimson Center, Washington, DC.
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